Spot copper prices dropped below the support line of a long term declining channel at the end of last year but are retesting that level and, in the process, forming an inverse head and shoulders basing pattern.

The pattern can be seen on the daily chart with the right shoulder forming this month and taking price back above the 50 day moving average. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and is above its centerline on both timeframes, and the accumulation distribution line crossed over its 21 period signal average. The commodity has attempted numerous times to right its downward trajectory and failed, and the primary trend is lower, but it will be interesting to observe the pattern play out. The decline has to end at some point.

The conditions have been met for famed market technician Tom DeMark’s dire market prediction to unfold. From an article on Bloomberg yesterday:
“The Standard & Poor’s 500 Index’s rally will give way to a full-blown retreat should the benchmark gauge lose altitude over the next few days, according to Tom DeMark, the chart analyst who predicted an advance in oil earlier this month.
A momentum formula employed by the DeMark Analytics LLC founder that compares closing prices with levels four days earlier would issue a bearish signal should the advance fizzle this week, he said. Specifically, it would foreshadow a decline should the S&P 500, which ended at 1,945.5 Monday, slip at Tuesday’s open and close below 1,926.82. Those conditions were met today.
The benchmark index slid 0.2 percent at the open and declined 1.3 percent to 1,921.27 at 4 p.m. in New York.”

and,

“Now that this S&P 500 trigger has occurred, the benchmark index will decline at least 8.2 percent from Monday’s close to 1,786, a level last seen in February 2014, according to DeMark. Should the market top correspond with what he referred to as “bad news,” the S&P 500 could see deeper selling down to 1,736, an 11 percent decline. DeMark sees the ongoing market rally as temporary relief as investors exit short positions.”

It’s always a pleasure to be featured on the “Off the Charts” segment of Mad Money. This week Jim Cramer highlights my technical take on several of the charts in the energy sector. Thanks again, Jim for the opportunity to be on the show!

Gold is breaking above the top end of the declining channel pattern it has been trading in for the last three years, and may be in the process of reversing the long term downtrend.

The daily chart shows a recently formed symmetrical triangle consolidation as a component of a larger pennant formation. A breakout from this bullish continuation pattern projects a price target measured by taking the height of the flagpole and adding it to the pennant breakout point. It is a very ambitious projection that would take the spot price back up to the $1380 area and retrace 38% of its 2011 high and 2015 low range.

(Remember my analysis reflects my personal opinion of the technical condition of a particular stock chart, and is not to be considered as a recommendation to buy or sell a stock.)

HCP (HCP)

HCP (HCP) is a health care REIT with an 8.5% dividend yield. The stock price is down 35% over the last year.

The weekly chart shows the steady decline in the stock from its 2015 highs which accelerated this month when the company issued weaker than expected guidance for 2016. That move took it back down to the $25.00 level or roughly the area of the 2007 and 2008 highs, and the test coincides in time with a key period on the Fibonacci timeline.

The stock saw a six session bounce off the long term support line but still has a lot of work ahead of it to just close this month’s gap. On the more positive side, the RSI is moving out of an oversold condition and Chaikin money flow is back above its centerline.

The risk/reward ratio is low for this stock.

American Airlines Group (AAL)

At first glance, it looks like a large head and shoulders pattern on the weekly chart of American Group (AAL), with a double top head and a rising neckline. But it has been my experience that long term expanded patterns seldom play out as they would on a short term timeframe.

The stock price came back down to test the neckline and potential channel support in the $36.00 area and managed a substantial bounce off that level, breaking above a downtrend line drawn off the highs since December last year. The weekly technical indications are flat but on the daily timeframe they are reflecting the recent positive price and money flow momentum.

The technical picture is undefined right now with many stocks like AAL, which experienced a strong bounce these last eight trading sessions. The moves were abrupt and generally not off well established bases. This stock has potential after a successful retest of the downtrend line or an upper candle close above the $40.50 interior support line, but from a trading perspective there are better candidates.

The stochastic oscillator on the daily S&P chart made a bullish crossover last week and added to that momentum in this shortened trading week. The key 1875 resistance level was broken and the index had two strong sessions with only a modest pullback at end the week.

The next level of resistance is the intersection of the extended former support line of the October through December declining channel, the 50 day moving average, and the horizontal resistance line drawn off the January and February highs. These lines are currently converging in the 1950 area, and a break above that level will also be a new short term swing high.
The stochastic oscillator, in tandem with identifying candle signals, has been spot on in highlighting short term shifts in market direction, and we’ll continue to be alert to them.